Industrial Market Ends 2020 With Record Fundamentals
The U.S. industrial market posted its strongest quarter on record in Q4, capping a year of robust demand and setting the stage for a bright outlook for 2021.
The COVID pandemic increased e-commerce’s share of total retail sales, thereby driving demand for industrial space. A record 104 million sq. ft. was absorbed in Q4, bringing the 2020 total to 223.5 million sq. ft. —11.8% higher than 2019.
Occupier demand kept developers active with 264.7 million sq. ft. of construction completions for the year—9.5% higher than 2019.
Despite robust development activity, the overall industrial vacancy rate remained low at 4.6%—down by 10 basis points (bps) from Q3 and only 20 bps higher than a year ago.
Asking rents skyrocketed in Q4 to a record $8.24 per sq. ft. a year, 2.2% higher than in Q3 and up 8.3% from a year ago. This is the highest rate of annual growth on record.
Industrial real estate enters 2021 with momentum. E-commerce and the need for safety stock to counter potential supply chain disruptions is fueling strong demand. This will further push up asking rents and keep vacancy rates near record lows despite a large amount of new development coming on line.